California has a balanced budget. Did Gov. Jerry Brown win or lose?
California Gov. Jerry Brown expended some political capital in his bid to close the state's budget deficit with a mix of cuts and higher tax revenue. He didn't get such a deal, but as of Tuesday night the state does have a budget.
Los Angeles — California’s long journey to a balanced state budget is over.
And Gov. Jerry Brown (D), who won accolades for his plain talk about the painful measures in store for Californians as they embarked on that path and who spent heavily from his political capital along the way, will sign it, analysts say.
In the end, did he get what he wanted?
The rosiest of assessments is that he got as much as he could, but it does not appear to be much. The budget that the Legislature approved Tuesday does not include any of the tax extensions he wanted to help California meet its shortfall, relying instead on cuts in spending and the assumption that an improving economy will lead to $4 billion in new revenue.
And in a worst-case scenario, if the economic recovery is insufficient, the budget includes a mechanism for major service cuts to compensate for the nonexistent revenues. That could be costly indeed.
“It might not look so good … if revenues fall short of the highly optimistic assumptions, [and] the resulting cuts will be unpopular,” says Jack Pitney, professor of government at Claremont McKenna College. “It’s like treating chronic fatigue with candy bars and caffeine.”
Republicans focused immediately on that estimated revenue windfall, with Senate Budget Committee Vice Chairman Bob Huff calling it a “wand that Harry Potter would be proud to wield,” according to the Los Angeles Times.
Governor Brown has been at the center of the budget debate since taking office in January, after winning an election based largely on his promise of turning the state around economically.
Last week, he made national headlines after vetoing California’s first on-time budget in a quarter-century. State Controller John Chiang then made the first use of Proposition 25, a November citizens’ initiative mandating no legislative pay for a missed budget deadline.
But assessments of the final budget deal call into question whether it was all worth it for Brown.
“Brown comes out as a winner and a loser,” says Robert Stern, president of the Center for Governmental Studies. Brown is a bigger loser because he and the majority Democrat Legislature are “using gimmicks to call the budget balanced, and it is an all-cuts budget with no tax extensions,” he says.
However, “given the two-thirds vote requirement [for a tax increase] and the Republicans’ intransigence on tax extensions, it is perhaps the best he could have gotten,” adds Mr. Stern.
Much depends on what happens to the economy in coming months. After much speculation that the US economy would definitely improve in the second half of the year, the Federal Reserve last week pulled back on that assessment.
However, Mark Zandi, chief economist at Moody’s Analytics, offers a more upbeat view. “Some of the headwinds that caused us to slow are turning into tail winds,” the Associated Press quotes him as saying.
Whichever way the economic winds blow, so goes Brown, analysts say.
“The economy will ultimately determine whether Brown is a winner. If revenues increase as much as the Democrats hope, all will be forgiven,” says Stern. “If not, the cuts will be severe and hurt the Democrats’ constituents much worse than the Republicans’.”
A more generous assessment of Brown’s standing comes from Barbara O’Connor, director emeritus of the Institute for Study of Politics and Media at California State University, Sacramento, who says Brown did as well as can be expected under the circumstances and will be applauded.
“I think it definitely helps Brown,” says Ms. O’Connor. “He didn’t allow the end run around his principles and set a finite time for when automatic cuts will be triggered … so he avoided the scenario of defaulting or issuing IOUs to state workers as has happened in past budget fiascoes here.”
Others say that for now, at least, everyone has come out a winner.
“In the short run, it’s a political victory for all sides of the political community,” says Claremont McKenna’s Professor Pitney. “Republicans can claim credit for standing firm against tax increases, Democrats can tell the public-employee unions that they blocked deeper cuts and prevented fundamental changes in the pension system. Governor Brown can say that he saved the state from its usual summertime budget impasse.”
But in the long run, say Pitney and the others, the outlook is less clear.
California Republicans are issuing statements in support of their own strategy to not give in to taxes.
“Republicans listened to the voters and stayed true to the only special interest we represent – California's taxpayers,” said Assembly Republican leader Connie Conway in a statement. “Despite every effort by Governor Brown, legislative Democrats, public employee unions, and other Sacramento special interests to pressure us to raise taxes by $58 billion, we honored the commitment we made to the people of California to stay out of their wallets.”
But some analysts say Republicans missed an opportunity for reform by being recalcitrant. Brown has been negotiating with them for months for just four votes – two in the Assembly and two in the Senate – needed to place a tax-extension vote before the public, one of his key campaign promises. If the public approved, it would have kept in place a temporary hike in the sales tax of 1 percentage point and a 0.5 percentage point increase in vehicle license fees.
“The Republicans wasted a huge opportunity to get pension reform because they wouldn’t give the four votes Jerry needed,” says O’Connor. “They could have gotten more reforms, [but] they didn’t play and weren’t at the table. And when you’re not at the table, you can’t define what it looks like, or criticize the results.”